While businesses have been principal agents in increasing greenhouse gas emissions, they are also seenbymany as crucial to tackling climate change.

However, our research shows how corporations’ ambitious pro-climate proposals are systematically degraded by criticism from shareholders, media, governments, other corporations and managers.

This “market critique” reveals the underlying tension between the demands of tackling climate change, and the more basic business imperatives of profit and shareholder value. Managers operate within increasingly short time frames and demanding performance metrics, due to quarterly and semi-annual reporting, and the shrinking tenure of executives.

Our research involved detailed analysis of five major Australian corporations over ten years, from 2005 to 2015. During this period, climate change became a central issue in political and economic debate, giving rise to a range of risks and opportunities for business.

Each of the companies we studied acted at the leading edge of this issue. However, despite operating in different industries (banking, media, insurance, manufacturing and energy) we found a common pattern in which initial statements of climate leadership degenerated over time into more mundane business concerns.

Our study revealed three phases to this transformation.

1. Climate change as a business opportunity

In this first phase, senior executives present tackling climate change as a strategic business decision.

This is epitomised by British entrepreneur Richard Branson, who has claimed that “our only hope to stop climate change is for industry to make money from it”.

The managers in our study associated climate change with words like “innovation”, “opportunity”, “leadership” and “win-win outcomes”. At the same time they ruled out more negative or threatening associations, such as “regulation” or “sacrifice”.

For example, in outlining why his company had embraced the climate issue, the global sustainability manager of one of the world’s largest industrial conglomerates told us:

We’re eliminating the false choice between great economics and the environment. We’re looking for products that will have a positive and powerful impact on the environment and on the economy.

2. Localising climate engagement

Thus, in the second phase, managers sought to make their proposals more concrete through eco-efficiency practices (such as reducing energy consumption, retrofitting lighting, and using renewable energy), “green” products and services, and promoting the need for climate action.

Notably, these are often supplemented with measures of corporate worth to demonstrate a “business case” for climate action (for instance, savings from reduced energy consumption, increased employee satisfaction and engagement, or improved sales figures from green products and services).

Importantly, companies also sought to communicate the benefits of these measures to employees through corporate culture change initiatives, as well as to customers, clients, NGOs and political parties.

As the environment manager at the global media company we studied outlined, these practices were central to creating a climate-conscious culture in his organization:

That inspires others and it gets things done. It’s a fantastic tool. It’s how behavioural change happens on sites.

3. Normalisation and business as usual

Over time, however, climate initiatives attracted renewed criticism from other business groups, shareholders, the media, and politicians.

For instance, the increasingly heated political debate over carbon pricing forced many companies to rethink their public stance on climate change.

As a senior manager at one of the country’s major banks explained:

How we deal with sensitivities within the organisation about taking what can be seen as a partisan position in a highly political environment … that’s the challenge at the moment.

And so, in the third phase we found that climate change initiatives were wound back and market concerns prioritised.

At this stage, the temporary compromise between market and social/environmental discourses was broken and corporate executives sought to realign climate initiatives with the goal of maximising shareholder value.

For example, new chief executives were promoted who advocated “back to basics” strategies. Meanwhile, climate change initiatives were diluted and relegated to broader and less specific “sustainability” and “resilience” programs.

One of our case study companies is a large insurance company. While initially very progressive on the need for climate change action, this changed after a reversal in its financial situation and a change of leadership.

As a senior manager explained:

Look, that was all a nice thing to have in good times but now we’re in hard times. We get back to core stuff.

Where next from here?

These case studies, on top of our previous research, show why corporations are particularly unsuited to tackling a challenge like climate change.

It also requires a reconsideration of corporate purpose and the dominance of short-term shareholder value as the pre-eminent criteria in assessing business performance. Alternative models of corporate governance, such as B corporations, offer pathways that better acknowledge environmental and social concerns.

In an era in which neoliberalism still dominates political imaginations around the world, our research shows the folly of depending on corporations and markets to address climate change.

Australian cars are using 23% more fuel than advertised, according to a report from the Australian Automobile Association, which also claims that eco-friendly hybrid electric cars emit four times more greenhouse gas than the manufacturers advertise.

The report on real-world (that is, on-road) emission testing was commissioned by consultancy firm ABMARC to test 30 cars twice on Melbourne roads. The method used to measure both the emissions and the fuel consumption was a so-called Portable Emissions Measurement System (PEMS).

They found that when compared to the laboratory limits, on-road vehicle NOx (a toxic gas pollutant) emissions were exceeded for 11 out of 12 diesel vehicles, and carbon monoxide (also a toxic gas) emissions were exceeded by 27% of tested petrol vehicles.

However, the key consideration here is the phrase “comparison to the laboratory limits” because on-road tests can’t directly be compared to the laboratory test limits, for several key reasons.

How are emissions from vehicles measured?

Australian Design Rules (ADR) stipulate that before introducing a new vehicle model on the market, every car or truck manufacturer in Australia has to test one new car in the laboratory.

This is done by placing the vehicle on a chassis dynamometer, connecting the exhaust to highly accurate emissions-measurement equipment, and driving the vehicle according to a strictly defined routine.

The chassis dynamometer simulates the load conditions that the vehicle would experience if it were driven on a road. In current practice, the New European Driving Cycle (NEDC) is used. This defines the speed of the vehicle and rate of acceleration for every second of the 20-minute test.

There is strict control of the testing protocol, with stipulations on how and when the gears should be changed, right down to minute details such as turning off the radio while the headlights are on. This strict control enables testers to compare the performance of different vehicles measured in different laboratories around the world.

However, these highly defined conditions have led to certain manufacturers enabling the car’s engine management system to recognise when it is being tested and to adopt and produce cleaner exhaust emissions. The most famous example of this is the recent VW scandal that affected millions of vehicles worldwide.

Even though the driving cycle has “new” in its name, NEDC was designed in the 1980s and today can be considered outdated.

Real Driving Emissions

To address these challenges, Real Driving Emissions (RDE) tests were developed. RDE tests measure the pollutants emitted by cars while driven on the road. To run a RDE test, cars are fitted with a Portable Emissions Measurement System (PEMS).

A PEMS is a complex piece of equipment that sits in the back of the car and monitors key pollutants emitted by the vehicle in real time as it is driven on the road.

These tests have proved extremely useful in highlighting some of the shortfalls of the laboratory tests. They can be run for much longer periods (several hours as compared with 15-30 minutes in the laboratory) and can give us information on long-term emission performance of the vehicles. They will not replace laboratory tests, but can provide additional information.

RDE requirements will ensure that cars deliver low emissions during on-road conditions. In 2021, Europe will become the first region in the world to introduce such complementary on-road testing for new vehicles.

RDE tests still face several unresolved challenges. The first is that the PEMS are still being developed and are not as accurate as the lab measurement equipment. The second, and more important, is the variability that one encounters while driving in real-world road conditions.

In order to compare the RDE test results with the laboratory-based standards a “conformity factor” is defined as a “not to exceed limit” that takes into account the error of measurements. This error is due to the PEMS equipment being less accurate, the variability in road conditions and driving behaviour, and thus the fact that the RDE tests will not deliver exactly the same results for each run.

A conformity factor of 1.5 would mean that the emissions measured by the PEMS in an RDE test should not exceed the standard NEDC test by more than a factor of 1.5. This is exactly the value that European Union legislators want to introduce – but not before 2021.

Australia is years behind

Australia remains years behind the European Union when it comes to vehicle emission standards.

The Euro emissions standards define the acceptable limits for exhaust emissions of new vehicles sold in the EU. Australia introduced the Euro 5 emission standards in 2016 as compared to Europe, which introduced these in 2009. At that time EU abolished the Euro 5 standard for already new ones in 2015.

Australia needs to upgrade to meet Euro 6 standards in order to provide effective detection of new vehicles. These include measures such as remote sensing as part of a vehicles road-worthiness assessment. This would help to ensure the maintenance status of vehicles and deliver compliance with Euro 6 RDE legislation.

What the Australian Automobile Association report highlights most of all is that the in-use vehicles (whether or not they are hybrid vehicles), many of which fall under the Euro 5 standard (or older), have almost all failed emission tests.

Until Australia updates our vehicle testing regimes to meet international standards, it will remain extremely difficult for Australians who want to buy an energy-efficient vehicle to make an informed purchasing decision.

In August last year, a third of the residents of the North Island township Havelock North fell acutely ill with gastroenteritis after their water was contaminated with campylobacter.

Following a long dry spell, the heaviest daily rainfall in more than ten years had washed the pathogenic organism from sheep faeces into the aquifer that supplies the town’s drinking water. The Havelock North supply, like many in rain-rich New Zealand, was not treated with chlorine or other disinfectants, and this was the country’s largest ever reported outbreak of waterborne disease.

This is just one example of how climate change may affect our health, according to a report released by the Royal Society of New Zealand today.

The RSNZ report is organised around eight prerequisites for good health, including community, shelter, water and food – all of which are threatened by climate change.

Building Blocks of Health Disrupted by Climate Change.Royal Society of New Zealand

The building block metaphor is apt. It is unlikely that climate change will undermine health in new and unexpected ways. Instead we expect it to act as a threat multiplier. Where there are weaknesses in the foundations of public health, rapid changes in temperatures, rainfall and sea levels will magnify damaging effects.

Direct and indirect effects

The impacts will include direct effects. More intense rainfall, especially on the western side of the country, will test health protection systems, as in the case of Havelock North.

But the impacts may also be indirect. The RSNZ report points out that changes in the climate may disrupt ecosystems, with knock-on effects for human health. As water temperatures rise, algal blooms occur more frequently, and human pathogens such as the vibrio species are found in higher concentrations.

There may be more intense exposure to pollen and other allergens, a particular concern given the relatively high rates of asthma that apply in New Zealand.

A reliable supply of food is one of the most important ecosystem services. The global food system is simultaneously more productive than ever before, and also exquisitely vulnerable. We depend more and more on a small number of crops, grown in mono cultures on larger scale and in fewer locations, dependent on longer supply chains and frequently requiring irrigation and heavy use of artificial fertilisers.

Climate change threatens the production and distribution of food in many ways. For instance, the rice crop in southern China currently fails due to high temperature stress once every century or longer, but this will be a once-in-10-year event with 2–3°C global warming, and once every four years if average temperatures rise by 5–6°C.

Effects on mental health

Climate change also acts through social stressors. Rising sea levels, combined with heavy rainfall, threaten many settlements around the New Zealand coast and elsewhere. The community of South Dunedin is one of the most vulnerable.

On a broader scale, internationally, it is projected climate change will displace very large numbers of people. The recent flood of refugees to Europe (sparked, in part, by climate extremes) illustrates the detrimental effects to security, community cohesion and health that may result.

The RSNZ report acknowledges that it is not just physical health that is important. Depression, anxiety, grief and other manifestations of loss and conflict may occur when familiar environments are damaged and social connections threatened. This is most evident following disasters such as droughts and floods.

The report refers to the particular threat climate change poses to Māori. Not only are Māori over-represented amongst those with low incomes, and at greater risk therefore of poor health from hazardous environments. Māori culture also embodies a strongly developed sense of relationship with place that carries with it responsibility and obligations. Climate change challenges this guardianship role.

Transition risks and opportunities

There is another dimension to health impacts that is not discussed in the RSNZ report. I refer to the damage that may be caused by the way we respond to climate change. Mark Carney, governor of the Bank of England, calls them “transition risks”. These are not trivial concerns, Carney says, because managing climate change successfully will require radical change, and the implications may be far reaching.

Expanded use of biofuels might compete with food crops, for instance. Carbon- pricing regimes may also aggravate food insecurity in the poorest populations. In low-income countries, reducing numbers of livestock to control methane emissions might be detrimental unless there are alternative sources of protein, energy and nutrients.

However, there are opportunities, too. The co-benefits agenda gets only a brief mention in the RSNZ report, which is a pity, since win-win interventions may provide a politically palatable route to substantial cuts in greenhouse emissions. For example well designed, comprehensive taxes on food could avoid a billion tons of greenhouse gas emissions and also prevent half a million premature deaths each year.

This is particularly relevant to New Zealand and Australia as most of the gains would be made by cutting the consumption of red meat in rich countries.

The Royal Society report concludes that more research is needed to better quantify the health impacts of climate change. This is true, of course. But we know enough already about risks to pay close attention to potential solutions. The big question, in my view, is how we take carbon out of the New Zealand economy, rapidly, and in an equitable fashion, without disrupting the building blocks of health.

Maybe we can do better than avoiding harm. Transport, agriculture, urban form, food systems – in these areas, and others, there are substantial opportunities as well as serious risks.